Hull/Liability Insurance Recommendations

Michael,

You got good advise back when you got it. It is, unfortunately, out
of date. The aviation insurance market has changed so much in the
last decade that it is not possible to get enough insurance to make
oneself a "target". Now, if you have the assets to own an airplane,
you have the assets to be a target. You are correct that a
plaintiff's attorney will not go after a dry hole; the problem is that
sublimits of $100,000, is not enough to stop an attorney from going
after the owner's assets should there be a serious injury or death.
The fact that a person owns an airplane is a pretty good indication
that there are assets to be reached in the event of a suit, even if it
is the insurance check that went to the owner to pay for the airplane
after the crash. Yes, some owners have structured their assets to get
them beyond reach of a lawsuit, or they think they have. They may
have moved them offshore, illegally, and the lawsuit may lead to a
discreet call to the IRS by the plaintiff's attorney that buys the
owner an opportunity to defend an action by the IRS and potentially,
criminal charges.

Sadly, I've had to defend the estates of pilots who bought inadequate
insurance and their widows found that the money that was there for the
widow and children got diminished substantially. Their memories of
their husbands were no longer that he was a good provider for the
family, but that he went out and did something stupid in an airplane,
killing himself and passengers and that he was cheap, especially when
a million smooth policy would have protected the estate completely.

It's sad to watch pilots who spend a bunch of money on an airplane go
cheap on things that matter, such as maintenance and insurance,
thinking they are getting a good deal, and then rationalize it with
phrases like "what the aviation attorneys don't want you to know".
The reality is that most aviation attorneys are pilots and want to do
their best for pilots. Right now, the aviation attorneys I know,
whether on the defense side or the plaintiff side, are recommending
million smooth policies to their friends because have seen what
happens to someone who has inadequate coverage. Many are trying to
get two million smooth, but are finding it hard to do so and they have
given up on getting any higher limits, because they are no longer
available. Some of my friends no longer fly on business because they
cannot get adequate coverage and an accident could mean the loss of
their business.

All the best,
Rick

(Michael) wrote in message . com...
(Rick Durden) wrote
(if you are getting less than $1 million smooth you may very well have
inadequate coverage as the "$100,000 sublimit" policies mean only
$100,000 is available per injured/deceased person, which is not
adequate for such a claim and puts your assets at risk)?

In an ideal world, everyone would be covered for millions for
everything. Ideal for attorneys, that is.

The best advice I ever got about liability insurance came from a
retired aviation attorney who had practiced in GA for 20 years. He
had just recently signed me off for my glider checkride, and was
suggesting that because of my prior experience as a skydiving
instructor, I needed to start working on my CFI-Glider. Since he was
a man of means and protection of personal assets was certainly an
issue for him, I asked him about liability insurance, specifically for
instruction. What developed was a fairly long and mostly one-sided
conversation on aviation liability insurance in general, the high
points of which I am going to relate here.

The first thing he told me was that he was telling me the dirty little
secret of the profession - something a practicing attorney was not
likely to tell me.

Here it is - all liability insurance does is make you a target. It is
VERY difficult to get an aviation attorney excited about taking a case
against an uninsured person unless that person has extensive assets -
and now we're talking about someone with enough assets that he is not
getting his risk management advice over the internet or via any other
informal method - he has people on retainer. Or, to put it another
way - if you need hull coverage, you really don't need liability
coverage. There is a reason why you can't buy hull coverage without
buying liability.

There are all sorts of reasons for this. Juries have a tendency to
make large awards (that are usually reduced later) against
corporations, but not so much against individuals. In most cases,
liability is tough to determine, so the suit is a long shot. And most
importantly, while an insurance company will usually settle a suit, an
individual will usually fight it out - and even if he loses, there's
usually little or nothing to collect for the plaintiff's lawyer
because the defendant's lawyer got it all. Of course the defendant's
lawyer could advise the defendant to settle - meaning give the money
to the plaintiff's lawyer. Yeah, that's likely.

It's also a little known fact that it's general insurance company
policy not to write a check to the plaintiff unless he accepts that
check as a complete settlement. If the plaintiff chooses not to
accept, the insurance company will defend the claim. Given the choice
between a possibly inadequate but sure thing settlement (of which the
plaintiff's lawyer will get a cut) and putting time and effort into a
case that may pay nothing, and will involve trying to get blood from a
stone, what do you suppose the plaintiff's lawyer will recommend?

So I asked this retired attorney what kind of aviation liability
insurance he carried. After all, he routinely flew and instructed in
aircraft he didn't own. The answer was none. I asked him what he
would do if he bought an aircraft, and he replied that he would get
the minimum he could get in order to have hull insurance, and
suggested I do the same. And so I have.

Michael

Rick Durden wrote:
Yes, some owners have structured their assets to get
them beyond reach of a lawsuit, or they think they have.

This part I agree with. I know several people who have a corporation as
the registered owner of the plane. They are the only officer of this
"corporation". They think this will protect them from a lawsuit. It
never does.

On 15 Oct 2004 07:25:53 -0700, (Rick Durden)
wrote:

Michael,

You got good advise back when you got it. It is, unfortunately, out
of date. The aviation insurance market has changed so much in the
last decade that it is not possible to get enough insurance to make
oneself a "target". Now, if you have the assets to own an airplane,
you have the assets to be a target. You are correct that a
plaintiff's attorney will not go after a dry hole; the problem is that
sublimits of $100,000, is not enough to stop an attorney from going
after the owner's assets should there be a serious injury or death.
The fact that a person owns an airplane is a pretty good indication
that there are assets to be reached in the event of a suit, even if it
is the insurance check that went to the owner to pay for the airplane
after the crash. Yes, some owners have structured their assets to get
them beyond reach of a lawsuit, or they think they have. They may
have moved them offshore, illegally, and the lawsuit may lead to a
discreet call to the IRS by the plaintiff's attorney that buys the
owner an opportunity to defend an action by the IRS and potentially,
criminal charges.

Sadly, I've had to defend the estates of pilots who bought inadequate
insurance and their widows found that the money that was there for the
widow and children got diminished substantially. Their memories of
their husbands were no longer that he was a good provider for the
family, but that he went out and did something stupid in an airplane,
killing himself and passengers and that he was cheap, especially when
a million smooth policy would have protected the estate completely.

So lets say the pilot has an estate of $1M and the $1M smooth
coverage. Won't the victims just go after both?

Nathan Young wrote:




So lets say the pilot has an estate of $1M and the $1M smooth
coverage. Won't the victims just go after both?

Yep.

"TripFarmer" wrote in message
...
IMHO, you should have enough to cover your assets. Then you should
make sure you have enough to cover any future earning you don't want to
give up. If you have $1-2M and are an average guy you should have enough.


Trip

You cannot cover your assets with liability insurance. Best you can do is
hope they go after your liability insurance and leave you assets alone.
Fact is your assets are fair game in addition to what liability insurance
might provide.

Dave Stadt wrote:

"TripFarmer" wrote in message
...

IMHO, you should have enough to cover your assets. Then you should
make sure you have enough to cover any future earning you don't want to
give up. If you have $1-2M and are an average guy you should have enough.


Trip


You cannot cover your assets with liability insurance. Best you can do is
hope they go after your liability insurance and leave you assets alone.

What...they "forget"?

(Rick Durden) wrote
You got good advise back when you got it.

When was that? I guess I'm really amazed how you are able to
determine when I got that advice.

The aviation insurance market has changed so much in the
last decade that it is not possible to get enough insurance to make
oneself a "target".

A million dollars is a pretty inviting target. On contingency, that's
$300K-$500K in the pockets of the attorney - worth a long shot.

Now, if you have the assets to own an airplane,
you have the assets to be a target.

Maybe that's the case if your airplane is an impulse purchase. For
most people I know, the airplane is the major asset - one they had to
borrow to purchase. I suppose that might be because I'm not an
attorney and don't know too many pilots who are.

With most people I know, once you take the house (if any) and the
airplane out of the picture, there's simply not much there in the way
of assets.

You are correct that a
plaintiff's attorney will not go after a dry hole; the problem is that
sublimits of $100,000, is not enough to stop an attorney from going
after the owner's assets should there be a serious injury or death.

You're not making sense. If the owner is a dry hole (or close to one)
$100K is about all there is. Are you telling me a plaintiff's
attorney will pass up a $100K settlement to roll the dice on a
possible $200K? Now if we're looking at assets in the $1M range,
that's another story. I don't know too many light plane owners in
that range.

The fact that a person owns an airplane is a pretty good indication
that there are assets to be reached in the event of a suit, even if it
is the insurance check that went to the owner to pay for the airplane
after the crash.

That's less than $100K in most cases, and most people have a note so
the bank gets paid first and immediately. Go try to get that money
after the bank has it...

You know, there are those who can easily afford aviation, and there
are those who can only afford it because they make it a priority. I
think your advice may be relevant to the former group, but not the
latter. It's a very rare individual who makes enough money to support
a family, own an airplane, and have anything at all left over for the
lawyers to take.

Yes, some owners have structured their assets to get
them beyond reach of a lawsuit, or they think they have. They may
have moved them offshore, illegally, and the lawsuit may lead to a
discreet call to the IRS by the plaintiff's attorney that buys the
owner an opportunity to defend an action by the IRS and potentially,
criminal charges.

Or they may have put them into a house, untouchable even in the event
of bankruptcy.

As for plaintiff's attorneys who have a habit of dropping the dime on
those who have illegally moved their assets offshore, they have a bad
history of getting their knees broken. People willing to break the
law are, well, willing to break the law.

given up on getting any higher limits, because they are no longer
available.

Want to clue us in - WHY are they no longer available? Would it be
because insurance companies have figured out that the settlement will
be based on how much coverage there is, rather than how much damage
was actually done? Would it be because they've figured out that the
increased coverage simply makes you too tempting a target?

Consider it as a simple matter of statitstics - if I'm wrong and the
amount of insurance is not a large factor in making you a target, you
could get $5M smooth simply by paying 5 times the rate for $1M smooth.

Michael

"Michael" wrote in message
om...
(Rick Durden) wrote
You got good advise back when you got it.

When was that? I guess I'm really amazed how you are able to
determine when I got that advice.

The aviation insurance market has changed so much in the
last decade that it is not possible to get enough insurance to make
oneself a "target".

A million dollars is a pretty inviting target. On contingency, that's
$300K-$500K in the pockets of the attorney - worth a long shot.

Now, if you have the assets to own an airplane,
you have the assets to be a target.

Maybe that's the case if your airplane is an impulse purchase. For
most people I know, the airplane is the major asset - one they had to
borrow to purchase. I suppose that might be because I'm not an
attorney and don't know too many pilots who are.

With most people I know, once you take the house (if any) and the
airplane out of the picture, there's simply not much there in the way
of assets.

You are correct that a
plaintiff's attorney will not go after a dry hole; the problem is that
sublimits of $100,000, is not enough to stop an attorney from going
after the owner's assets should there be a serious injury or death.

You're not making sense. If the owner is a dry hole (or close to one)
$100K is about all there is. Are you telling me a plaintiff's
attorney will pass up a $100K settlement to roll the dice on a
possible $200K? Now if we're looking at assets in the $1M range,
that's another story. I don't know too many light plane owners in
that range.

The fact that a person owns an airplane is a pretty good indication
that there are assets to be reached in the event of a suit, even if it
is the insurance check that went to the owner to pay for the airplane
after the crash.

That's less than $100K in most cases, and most people have a note so
the bank gets paid first and immediately. Go try to get that money
after the bank has it...

You know, there are those who can easily afford aviation, and there
are those who can only afford it because they make it a priority. I
think your advice may be relevant to the former group, but not the
latter. It's a very rare individual who makes enough money to support
a family, own an airplane, and have anything at all left over for the
lawyers to take.

Yes, some owners have structured their assets to get
them beyond reach of a lawsuit, or they think they have. They may
have moved them offshore, illegally, and the lawsuit may lead to a
discreet call to the IRS by the plaintiff's attorney that buys the
owner an opportunity to defend an action by the IRS and potentially,
criminal charges.

Or they may have put them into a house, untouchable even in the event
of bankruptcy.

As for plaintiff's attorneys who have a habit of dropping the dime on
those who have illegally moved their assets offshore, they have a bad
history of getting their knees broken. People willing to break the
law are, well, willing to break the law.

given up on getting any higher limits, because they are no longer
available.

Want to clue us in - WHY are they no longer available? Would it be
because insurance companies have figured out that the settlement will
be based on how much coverage there is, rather than how much damage
was actually done? Would it be because they've figured out that the
increased coverage simply makes you too tempting a target?

Consider it as a simple matter of statitstics - if I'm wrong and the
amount of insurance is not a large factor in making you a target, you
could get $5M smooth simply by paying 5 times the rate for $1M smooth.

Michael

You and I know people in entirely different financial situations. What you
say might be true for a minority of airplane owners but Rick is right in the
main.

Newps wrote
Nathan Young wrote:

So lets say the pilot has an estate of $1M and the $1M smooth
coverage. Won't the victims just go after both?

Yep.

Well, hold on a sec. If the insurance company offers to settle at
policy limits, the victim has a choice. He can accept the $1M
insurance - a sure thing - but then he CAN'T go after the estate.
That's a condition of settlement.

Or he can go after both - but now the insurance company will defend
the case. He may get nothing. He may get less than $1M. He may get
more than $1M at the jury trial, simply to see it reduced on appeal.

If the case is ironclad (meaning you were very obviously at fault and
the damage is huge) then NO AMOUNT of insurance you can buy will ever
be enough. However, the reality is that in most cases it's not so cut
and dried. That's where a plaintiff is likely to settle for the part
(the insurance) rather than going for the whole.

Because in most cases the plaintiff is represented by a lawyer working
on contingency (few can afford the fees out of pocket, and the ones
who can are not likely to sue in the first place) the plaintiff's
lawyer will almost always recommend a settlement - it's easy money and
a sure thing. Only time he's going to recommend not accepting a
settlement is when he believes that he can win AND collect. And
that's the rub - see my other posts. You can't get blood from a
stone.

The fact is, most owners of airplanes that cost less than six figures
are NOT wealthy. They're just guys with jobs or small businesses, and
after the plane is crashed, the defense lawyer paid, and the house
(which you can't take) paid for, there's simply nothing left to
collect.

Michael

"Michael" wrote in message
om...
Newps wrote
Nathan Young wrote:

So lets say the pilot has an estate of $1M and the $1M smooth
coverage. Won't the victims just go after both?

Yep.

Well, hold on a sec. If the insurance company offers to settle at
policy limits, the victim has a choice. He can accept the $1M
insurance - a sure thing - but then he CAN'T go after the estate.
That's a condition of settlement.

Or he can go after both - but now the insurance company will defend
the case. He may get nothing. He may get less than $1M. He may get
more than $1M at the jury trial, simply to see it reduced on appeal.

If the case is ironclad (meaning you were very obviously at fault and
the damage is huge) then NO AMOUNT of insurance you can buy will ever
be enough. However, the reality is that in most cases it's not so cut
and dried. That's where a plaintiff is likely to settle for the part
(the insurance) rather than going for the whole.

Because in most cases the plaintiff is represented by a lawyer working
on contingency (few can afford the fees out of pocket, and the ones
who can are not likely to sue in the first place) the plaintiff's
lawyer will almost always recommend a settlement - it's easy money and
a sure thing. Only time he's going to recommend not accepting a
settlement is when he believes that he can win AND collect. And
that's the rub - see my other posts. You can't get blood from a
stone.

The fact is, most owners of airplanes that cost less than six figures
are NOT wealthy. They're just guys with jobs or small businesses, and
after the plane is crashed, the defense lawyer paid, and the house
(which you can't take) paid for, there's simply nothing left to
collect.

Michael

I don't believe your last statement at all. Certainly not true of the
people I know.